Why were XRP sales to institutions treated differently?

The full answer

What did the court decide about Ripple’s sales to institutions?

In its July 13, 2023 opinion, the court held that Ripple’s Institutional Sales of XRP constituted the unregistered offer and sale of investment contracts in violation of Section 5 of the Securities Act [5]. The background to the case is on the page what the SEC vs Ripple lawsuit was about.

What the sources do give is Ripple’s own summary. On September 15, 2026, Ripple wrote that in 2023 it “secured a landmark victory establishing that XRP is not a security” [1]. That sentence is about the token. It does not describe how each kind of Ripple sale was treated.

How can the same token be a security in one sale and not in another?

The SEC’s Release 33-11412, dated March 17, 2026 and effective March 23, 2026, sets out the distinction in the regulator’s own words. It lists XRP among its examples of digital commodities and says digital commodities “are not themselves securities” [2]. The same release says a non-security crypto asset “can be offered and sold subject to an investment contract, which is a security” [2]. It adds that such an asset does not necessarily remain subject to that contract in perpetuity [2].

Ripple described this release on 15 September 2026 as a joint SEC and CFTC interpretation “naming XRP a digital commodity” [1].

What is the Howey test, and which of its prongs decided each kind of sale? Howey is the test courts use to decide whether a deal is an “investment contract,” one of the things US law treats as a security. The July 2023 opinion states it as “a contract, transaction[,] or scheme whereby a person [(1)] invests his money [(2)] in a common enterprise and [(3)] is led to expect profits solely from the efforts of the promoter or a third party.”[5]

In Release 33-11412 (March 2026), the CFTC says the interpretation “does not supersede or replace the Howey test, which is binding legal precedent”. The SEC’s March 2026 release says it “does not supersede or replace the Howey test, which is binding legal precedent” [2]. In explaining why its listed tokens are digital commodities, the release says they derive their value from the operation of a working crypto system and from supply and demand, “rather than from the expectation of profits from the essential managerial efforts of others” [2].

The 2023 opinion addressed the prongs as follows.

Investment of money: “the Institutional Buyers invested money by providing fiat or other currency in exchange for XRP.”[5]

Common enterprise: “Ripple pooled the proceeds of its Institutional Sales into a network of bank accounts under the names of its various subsidiaries.”[5]

The court wrote that “Whereas the Institutional Buyers reasonably expected that Ripple would use the capital it received from its sales to improve the XRP ecosystem and thereby increase the price of XRP,” Programmatic Buyers “could not reasonably expect the same.”[5]

The court found that “Ripple’s Programmatic Sales were blind bid/ask transactions, and Programmatic Buyers could not have known if their payments of money went to Ripple, or any other seller of XRP.”[5] An institutional buyer, by contrast, “knowingly purchased XRP directly from Ripple pursuant to a contract.”[5]

The court noted that “some Institutional Buyers agreed to lockup provisions or resale restrictions based on XRP’s trading volume.”[5]

Terraform Labs, Judge Rakoff “declined to distinguish between investors who purchased tokens directly from defendants and those who obtained their tokens through secondary transactions,” according to a client alert by the law firm Morrison & Foerster. The alert quotes him: “Howey makes no such distinction between purchasers,” and "That a purchaser bought the coins directly from the defendants or, instead, in a secondary resale transaction has no impact on whether a reasonable individual would objectively view the defendants’ actions and statements as evincing a promise of profits based on their efforts.

It describes his opinion as "reject[ing] the approach recently adopted by another judge in [the Southern District of New York] in a similar case, SEC v.

How much XRP did Ripple sell to institutions versus programmatically?

The court’s August 7, 2024 remedies order says Ripple received $728 million from Institutional Sales under written contracts and $757 million from Programmatic Sales on digital asset exchanges [12]. Ripple’s own sales reporting has also narrowed. Its Q1 2025 XRP Markets Report, published May 5, 2025, said Ripple had published the report since 2017 and would sunset it in its current form starting in Q2 2025 [3]. In the same report Ripple said its transparency “has been used against the company—most notably by former SEC leadership” [3].

crypto.news reported on July 25, 2026 that the money behind Ripple’s acquisitions was built “in substantial part, on years of programmatic XRP sales” [4]. The page on whether Ripple is dumping XRP on holders covers Ripple’s sales in more detail.

The SEC alleged that Ripple sold “approximately $728.9 million of XRP” in Institutional Sales, and about $757.6 million through Programmatic Sales on trading platforms.[5] A third category, Other Distributions of XRP for non-cash consideration, was recorded at “$609 million in ‘consideration other than cash’.”[5] The court found only the first category unlawful, so the two sales channels, close in size, ended on opposite sides of the line. ## How did the ruling treat Ripple’s XRP sales to ODL customers?

The court’s August 7, 2024 order says the earlier Order defined Institutional Sales as including sales to ODL customers [12].

The court described it as letting customers “exchange fiat currency (for example, U.S. dollars) for XRP and then the XRP for another fiat currency (for example, Mexican pesos).”[5] The court defined Institutional Sales as direct sales under written contracts to counterparties that were “primarily institutional buyers, hedge funds, and ODL customers.”[5]

Can Ripple still sell XRP directly to institutions today?

The SEC said on August 7, 2025 that the district court’s final judgment imposed a $125,035,150 civil penalty against Ripple and an injunction prohibiting Ripple from violating the registration provisions of the Securities Act of 1933, and that following the dismissal of the cross-appeals that final judgment will remain in effect [6]. The page asking whether the SEC vs Ripple case is over covers the end of the case. The page on how much Ripple had to pay the SEC covers the penalty.

The Second Circuit did not rule on the disagreement in Ripple’s case. On August 7, 2025 the SEC and Ripple filed a joint stipulation that dismissed the SEC’s appeal and Ripple’s cross-appeal, and the district court’s final judgment stayed in effect, the SEC said.[6] How other courts have handled the reasoning is on whether the Ripple ruling binds other courts, and whether a later regulator or court could draw the line differently is on whether XRP’s regulatory position could reverse.

Does this mean XRP bought on an exchange today is not a security?

The 2026 release lists XRP as a digital commodity and says digital commodities are not themselves securities (March 17, 2026) [2]. The release also says the SEC “may refine, revise, or expand upon the interpretation” [2]. Ripple wrote that it is “confident that XRP’s status as a digital commodity will not change as that rulemaking proceeds” [1]. That is Ripple’s view, not a ruling. The full question is on the page is XRP a security?

What is the strongest case against reading the 2023 result as a clean win?

Two points in the sources cut against it. First, the SEC’s release says the agency may revise its interpretation [2]. A later agency could read the same facts differently, which is the subject of the page on whether a future US government could reverse XRP’s regulatory position. Second, crypto.news argued on 25 July 2026 that the capital Ripple used to buy its businesses “originated, to a meaningful degree, in sales of the token to the market”, so XRP holders “funded it, transaction by transaction” [4].

Whether other courts accepted or rejected the split between kinds of sale is covered on the page asking whether the Ripple ruling binds other courts.